What is a Debtor?

Wikipedia described the debtor as an entity that owes a debt. The entity can be an individual, company, government or legal personality. The other party is referred to as creditor while the common term for debtor is borrower. There is default when the debtor fails to settle its legal obligations based on the debt contract such as a scheduled payment or has violated an agreement in the debt contract. Default may also happen if the debtor is either unwilling or unable to pay its debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory notes.

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This article explains what debt problems are, enumerates the solutions for these and defines the Office of the Superintendent of Bankruptcy Canada.

What are Debt Problems?

Debt problems cannot be avoided. Some can be resolved easily while others may require professional help. The best way to manage this kind of problem is to take control of them before all these become out of control. Financial difficulties are brought about by the following:
  1. Going beyond your spending limit or using the credit card more of a luxury than a necessity

  2. Insufficient wages because it is used to pay outstanding debts

  3. You borrow money to make it from one payday to the next pay period.

  4. You pay interest charges but do not reduce the principal.

  5. Creditors keep on pressuring you for payment and you are faced with repossession

  6. Utility bills remain unpaid

What are Possible Solutions?

The Office of the Superintendent of Bankruptcy Canada offers the following solutions to debtors:

Contact your creditors
Explain failure for payments and suggest making lower payments over a longer period of time. Most creditors are willing to accept such arrangements.

Credit counselling
Credit counselling services are available, but may be different from province to province. Contact a local family or community counselling office or a credit counselling association to find out how to get in touch with such a service.

Debt consolidation loan
You can ask a bank or financial institution about combining or "consolidating" your debts into one loan. In such a case, the bank or financial institution will pay off all your debts and, in return, you make single monthly payments to the bank or financial institution. Make sure to shop around because interest rates are different. It is important to stop buying on credit.

Consolidation order
If you live in Alberta or Saskatchewan, you may apply for a consolidation order. A consolidation order sets out the amount and the times when payments are due to the court. The court will distribute your payments to your creditors. This part of the Bankruptcy and Insolvency Act lets you pay off your debts over three years to avoid creditor harassment and wage garnishment.

Voluntary Deposit scheme
For residents of Quebec, the Voluntary Deposit scheme is similar to a consolidation order. You must make a monthly payment based on your income and number of dependants, to the court. This service is usually available at the local courthouse.

Consumer proposal
Under the Bankruptcy and Insolvency Act you may make a consumer proposal to your creditors to reduce the amount of your debts, extend the time you have to pay off the debt, or provide some combination of both.

If none of the above methods solves your debt problem, you may choose to declare bankruptcy. Bankruptcy should be a last resort if you cannot meet your financial obligations through affordable payments over a specific period of time.

It is a legal process performed under the Bankruptcy and Insolvency Act. Because of your inability to pay your debts, you assign all of your assets, except those exempt by law, to a licensed trustee in bankruptcy. This process relieves you of most debts, and legal proceedings against you by creditors should stop.

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What is the Office of the Superintendent of Bankruptcy Canada?

The Superintendent of Bankruptcy is authorized to administer estates and matters under insolvency legislation. As part of its legislative mandate, the OSB carries out its task to contribute to a fair and efficient marketplace by protecting the integrity of the Bankruptcy and Insolvency system for the benefit of investors, lenders, consumers and public interest.

The OSB intends to achieve this mission by concentrating its efforts on the following four strategic objectives:
  1. maintain an efficient and effective regulatory framework

  2. promote awareness of the rights and responsibilities of the stakeholders in the insolvency system

  3. ensure trustee and debtor compliance with the legislative and regulatory framework

  4. be an integral source of information on Canadian insolvency matters

Pls See: Objectives of OSB

Reacting to Debt Problems

Getting buried in debt is a very difficult situation. Hence, consumers should be very careful so as not to fall under this condition. With solutions being offered to debt-ridden entities, things have become manageable. It is a matter of following the prescribed solutions by the Superintendent of Bankruptcy and other qualified professionals.

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